Goodman Group’s shares have been on an upward trajectory over the current year, performing better than other similar companies in the Australian real estate area, as the so-called artificial intelligence boom has triggered a high-intensity increase in demand for data centers.
Global hyperscalers, or large-scale cloud service providers such as Amazon, Microsoft, and Meta, are currently pouring billions of dollars into data centers. The relevant actions are related to the desire to meet the growing consumer demand for artificial intelligence services.
The Australian data center market is currently in the nascent stage, but significant investments have been raised there this year. In the relevant context, it is worth mentioning that, for example, in September, Blackstone acquired AirTunk for $14.91 billion.
The inventory of Goodman reflects the increased demand for data centers. As of the end of September, the mentioned category’s functional facilities under construction accounted for 42% of the company’s project portfolio worth $7.96 billion. It is worth noting that at the end of last year, the mentioned figure was 37%. The value of Goodman shares has increased by 45.8% since the beginning of 2024. In the context of the dynamic of this indicator, the company has demonstrated the best results since 2006.
John Lockton, head of investment strategy at Sandstone Insights, said that higher exposure to data centers in development makes the market more comfortable paying a higher multiple for the business.
It is worth noting that there is currently no consensus among experts on the prospects for further increasing the value of Goodman shares. Some analysts suggest that investor interest in data center-focused securities will begin to fade as these stocks rise in price.
Winky Yingqi Tan, a Morningstar analyst focused on REITs, said Goodman’s shares are expensive at current prices. The expert also drew attention to the risks of obsolescence of data centers, which will lead to capital-intensive modernization of these functional facilities. According to Winky Yingqi Tan, this circumstance and increasing supply by competitors may eventually erode Goodman’s returns.
As we have reported earlier, Australia Develops Plan to Boost AI Investment.
